This ad has been simply unavoidable over the last couple days, and we covered the “headline” stock that Moors says has its tentacles in everay aspect of solar energy in yesterday’s piece… but the teaser pitch from Energy Advantage says there are two other stocks to be bought as well. What are they?
Well, time to find out. If you missed part one, which in addition to the answer to the first clues also included a nice bit of discussion from our readers (always among the wisest and best-looking), you can find it here.
And now… straight to the clues, please!
“… here’s my second ‘MUST’ solar play for anyone serious about making huge money fast.
“It’s the company that made solar available at night… and sold out in a week!
“This company has developed a way to store the endless power of the sun – anytime, anywhere – to be used on cloudy days and even at night!”
Well that sounds like an awfully big deal! How on earth did they make it possible to use solar power at night? What wizardry is this? More from the ad…
“I’m talking about solar batteries…
“Sleek, wall-mounted batteries with massive capacity. Powerful enough to store 10,000 watt-hours of electricity.
“The ramifications of this are rattling the industry.
“You see, until now, folks using solar had to stay plugged into the local utility company in order to maintain power at night, or on rainy days.
“Now you can capture energy while the sun is shining, and then store it for use during the evenings or when the weather gets rough.
“This new technology could ELIMINATE the need for utility companies, allowing individuals and corporations to go completely “off-the-grid” ….
“The Washington Post calls this company’s battery the ‘coming revolution in energy storage.'”
Ah… I bet you already know who this is. But just in case, a couple more clues:
“‘This company’s solar battery grabbed $800 million in its first week.’ – Bloomberg
“‘We’re basically sold out through the middle of next year – in a week!’ – said the company’s president”
So yes, this is Tesla (TSLA), which made a big splash with its “Powerwall” battery that’s designed to store energy from rooftop solar installations. Of course, it could well be that Moors is actually more interested in SolarCity (SCTY), since the two companies are effectively joined at the hip thanks to their shared controlling investor, Tesla CEO Elon Musk, wields over both firms (I think it might be against the law to refer to Musk without the adjective “visionary”, so hopefully this parenthetical comment will fulfill my legal obligations).
But yes, Tesla is really the battery company, regardless of whether it’s SolarCity or other solar customers who are interested in their batteries — and they sure are gearing up for dramatically higher battery production in the future with the building of their “Gigafactory” in the Nevada desert (that’s been teased plenty of times as well, of course, both because of their partners and because of the demand it will create for more lithium production — there was even a recent “Metal Oil” pitch for lithium that we haven’t covered yet, but it was discussed by readers here.)
Batteries, like the Tesla Powerwall, are much easier to build than electric cars, and probably much higher-margin if they can get volumes up… who knows, maybe someday Tesla will be known as a power storage company and the cars will just be a sideline. But for now, they’re a hugely capital-intensive automobile manufacturing startup that’s losing buckets of money and carries what I consider a wildly premium valuation. The shares trade for about 60X the average analyst-forecasted earnings for 2018. Now, obviously those forecasts are going to be wrong, and we won’t know for a long time whether they’re optimistic or pessimistic, but Tesla is the very definition of a “story” stock — it’s trading at these levels because people expect Elon Musk to change the world, not because the business is going to be earning a reasonable profit anytime soon. Maybe he will, I don’t know — there isn’t much reason to listen to me about Tesla, I’ve had trouble finding the valuation acceptable ever since it was in the mid-$30s early in 2013, and it’s well over $200 now, so I’ve clearly missed the bus on this one. Gigafactory and “Model 3” news will be the driver for Tesla over the next couple years, I expect, and I have no idea how that will go.
The cost is not crazy for consumers — it looks like the Powerwall, in terms of capacity and ability to run most of the electrical systems of a house for a limited time, is priced pretty similarly to the backup propane generator we have here on Gumshoe Mountain — though we have to have propane available for the generator to work and that costs money, with the flip side being that we can keep it going for months if necessary, as long as the propane truck can still deliver (the Powerwall is designed to just run the house at night when the sun’s not shining, but could also perhaps be a backup for a couple rainy, grey days when the photovoltaics don’t provide much juice).
SolarCity (SCTY), likewise, is trading at a crazy valuation given current performance, even after getting cut in half this year — but they at least are building a network of installed homes and long-term cash flow, so there is the possibility, at least, that there will be some point at which it becomes scalable and provides a consistent utility-like return on capital. I don’t know if they have much of a differentiated position in the marketplace other than what they’ve built through very aggressive promotional spending, since anyone can install solar and there should be a lot of competition, but there’s some potential for a national brand and for economies of scale.
The numbers don’t indicate any kind of scalability yet, from my quick look at their financials it appears that each dollar of revenue they bring continues to cost more and more in both direct (cost of goods) and indirect (sales, marketing and overhead) expenses — this is a company being built based on a vision, as far as I can tell, not based on foreseeable financial metrics. Sometimes visions work and you just have to trust the visionary (as in Amazon, whose valuation I’ve also never been able to justify to my satisfaction, and to my portfolio’s regret), but you really do have to buy in to the vision and the future growth and not worry about the financials or you’ll give yourself a persistent headache or develop a Maalox habit.
And Dr. Moors has one other stock to benefit from the magical powers of silica and sun… here’s how he teases it:
“Now, let me show one more opportunity that you need to give serious consideration.
“I want to tell you right up front, this company is highly speculative.
“That means you take a little more risk, but the upside potential it offers is completely off the charts.
“And considering the technology they’ve developed…
“It’s possible this company could potentially deliver a 100,000% return, just like Paladin Energy did.
“This company, located a stone’s throw from the U.S. Department of Energy in Washington, D.C., is developing a breakthrough technology that could give power – and wealth – to every property owner in America.
“In short, they’re creating a see-through, invisible coating – like a decal – that converts existing windows into electricity generators!
“Once the coating is peeled onto the window, it operates like a regular panel, capturing sunlight and converting it into power.
“With 85 million commercial buildings and homes in the United States alone, the market is enormous, and completely untapped….
“And because the window coatings are made from two of the most abundant elements in nature – hydrogen and carbon – they just may turn out to be the first technology immediately affordable for anyone.
“Plus, they’re engineered to be as many as 50 times more efficient than regular panels, and can even absorb sunlight in shaded alleyways….
“The potential is staggering… and things are starting to move.
“The company has entered into an agreement with the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL), and an announcement is pending on when these new window panels will hit the market.
“For investors willing to take a flyer, this highly speculative play offers phenomenal potential.
“At the moment, this company has a market cap of $67 million. It’s tiny, barely a blip on the screen.”
This one is SolarWindow Technologies (WNDW on the OTCQB), which may be better-remembered by Gumshoe readers as New Energy Technologies (which used to trade under the ticker NENE, from 2009 until earlier this year) or, before that, Octillion (founded in the late 1990s, trading under OTCL until 2009). The product itself has changed names a few times as well, originally touted as a “spray-on” nano-power window coating and now pitched as a more reasonable-sounding film or built-in OEM window technology (still the same basic technology they’ve been tinkering with for a decade or so, but they say they’re much further along now).
The promise is that their “solar window” is an organic photovoltaic collector, made somehow of a lattice of hidden wires in the window that are invisible or barely visible, and this converts sunlight to electricity. Which sounds like the best idea ever, at least for the most appealing market: skyscrapers. Lots of sun hits the windows of skyscrapers, so if you could cover a building with photovoltaics, even if they’re very inefficient, you could theoretically generate a lot of the electricity that building requires. But, of course, it sounded like the best idea ever back in 2007, too, and in 2010 when it was being actively teased by a different newsletter, and these things don’t always move at the speed foreseen by trigger-happy newsletters.
Right now, SolarWindow says they’re on a “28 month” path to commercialization — that was in August, when they essentially repackaged the current “story” of the company, including a demonstration video of the product in use, and reinvigorated the shares a little bit. So that would mean that they think they’ll be selling a commercial product by January of 2018. Their intent is to do this through licensing, they don’t have any intention of building a $100 million manufacturing plant — not that they would necessarily be able to get that kind of financing anyway.
The company has apparently been very much dependent on their major shareholder, Harmel Rayat, though he doesn’t appear to be on the board and I don’t know what position he holds — probably convertible debt or promissory notes with warrants, since that’s how WNDW has financed a lot of their work over the past decade.
They need to raise money right now, according to their last quarterly filing — they should be out of cash now, they had enough to get them through October as of their June report, and they have not yet filed their September quarter (which is their fourth quarter, so the pending report is their Annual Report 10-K). The 10-K was filed on November 14 last year, so it ought to be imminent. I’ve seen no notice of any funds raised or debt taken on over the last few months, which makes me a bit concerned — the August presentation very much had the flavor of a road show, talking up their commercialization timeline and getting input from potential partners in the glass and utility industries, but unless I missed it that didn’t result in any fundraising.
SolarWindow remains a very cool story, even though it appears to me, after viewing the presentation, that the actual demonstration windows so far are quite small and pretty deeply tinted and in need of the next iterative advancements in the science. But with at least two years until commercialization and no partners that I can see who are providing up front capital to fund them to that level (and signing license agreements), and only a very theoretical grasp of the potential economics of the product, it’s very, very speculative… and, as a story stock, there’s absolutely no relationship between the stock price and the actual operating business — it’s still a venture capital investment, it might hit or it might miss, and we won’t know for many years whether it hits or how much the technology is actually worth.
Whether it’s worth fifty cents or $5 or anything higher or lower or inbetween is still a wild guess, in my mind… particularly because they’re going to have to raise money to keep the business going. If they raise a small amount and announce it this week or next, like a million or two million dollars from existing shareholders to get them through the next quarter or two, I’d be a bit more worried — they need a big bolus of cash to really push the projects forward, I would think, and their big investor roadshow presentation in August was their most earnest attempt to tell the story of the company in years. If that doesn’t get them closer to “real” financing for their two+ year push to advance the science and commercialize the product, I’m not sure what will.
For what it’s worth, this is what Dr. Moors says:
“This company is for real. Just like with every company I recommend, I’ve fully vetted it and done extensive due diligence.
“In addition, its financial payback was validated by independent researchers and engineers at the University of North Carolina Charlotte’s Energy Production and Infrastructure Center.
“But let me make this absolutely clear: This company is highly speculative.
“They haven’t sold any window generators yet, and we don’t know what will be disclosed in their upcoming announcement.”
I don’t know what upcoming announcement he means, maybe he’s expecting financing or partnership deals to be announced, or maybe he’s just referring to the expected 10-K… but yes, I’d agree that it’s highly speculative. And has been for years, this has been an R&D lab subsisting on speculative storytelling for more than 15 years now, with no real licensing deals or products yet that I’m aware of (if you want something that sticks out as a suspicious thread to pull, note that their annual R&D spending has never been much over $600K, but selling, general and administrative expenses are typically four times that high… that’s potentially worrisome for a company that’s still at least a year or two from having a commercial prototype to market to partners).
We’ve had quite a few NENE and now WNDW shareholders come through the doors here at Stock Gumshoe over the years, so I’m sure there are some investors who’ve been following the story more closely than I have — so do you have some updates for us, or reasons for extra optimism or pessimism? Let us know with a comment below. Thanks!